Kymriah filed DLBCL in the US with Priority Review and in the EU with accelerated assessment

ACZ885 submitted to FDA and EMA for cardiovascular risk reduction

Biosimilars for adalimumab (US) and pegfilgrastim (EU) filed

Advanced Accelerator Applications acquisition completed

Dividend of CHF 2.80 per share, an increase of 2%, proposed for 2017

2018 Group Outlook:

Net sales are expected to grow low to mid single digit (cc)

Core operating income is expected to grow mid to high single digit (cc)

Elizabeth Barretthas been appointed CEO Novartis Oncology and Robert Kowalski, Head of Global Regulatory Affairs, will assume ad interim leadership of the Drug Development Organization, both effective February 1, 2018

Key figures[1]

Q4 2017

Q4 2016

% change

FY 2017

FY 2016

% change

USD m

USD m

USD

cc

USD m

USD m

USD

cc

Net sales

12 915

12 322

5

2

49 109

48 518

1

2

Operating income

2 070

1 455

42

41

8 629

8 268

4

7

Net income

1 976

936

111

58

7 703

6 698

15

12

EPS (USD)

0.85

0.40

113

59

3.28

2.82

16

14

Free cash flow

2 456

2 976

-17

10 428

9 455

10

Core

Operating income

3 223

3 013

7

5

12 850

12 987

-1

0

Net income

2 818

2 658

6

4

11 391

11 314

1

2

EPS (USD)

1.21

1.12

8

6

4.86

4.75

2

3

[1] Constant currencies (cc), core results and free cash flow are non-IFRS measures. An explanation of non-IFRS measures can be found on page 42 of the Condensed Financial Report. Unless otherwise noted, all growth rates in this Release refer to same period in prior year.[2] RTH258 also met its primary endpoint of non-inferiority compared to aflibercept in mean change in best-corrected visual acuity for nAMD

"Novartis had a good year in 2017. Cosentyx reached multi-blockbuster status, Entresto delivered over USD 500 million in sales and Alcon returned to growth. It was a landmark year for innovation resulting in a rich late stage pipeline. With several key launches on the horizon and our new operating model in place, Novartis is poised for sustainable growth."

Vas Narasimhan, designated CEO from February 1, commented:

"I want to thank Joe and the Board for their leadership and guidance as I transition to my new role. As CEO my priorities will be driving our next growth phase by strengthening operational execution, delivering more breakthrough innovation, pivoting to become a data centric, digitally enabled organization, building trust and reputation and transforming our culture. I feel privileged to lead Novartis at this exciting time."

Net income was USD 2.0 billion (+111%, +58% cc), driven by the strong operating income growth and higher income from associated companies. The prior year included exceptional charges related to a revaluation loss in Venezuela of USD 0.3 billion.

EPS was USD 0.85 (+113%, +59% cc), driven by growth in net income and the benefit from the share buyback program.

Operating income was USD 305 million (-16%, -19% cc) mainly due to US price erosion and higher manufacturing restructuring charges, partly offset by continued gross margin improvement. Core operating income was USD 543 million (+4%, +1% cc). Core operating income margin increased by 1.1 percentage points (cc) mainly driven by favorable product and geographic mix and ongoing productivity improvements; currency had a negative impact of 0.2 percentage points, resulting in a net increase of 0.9 percentage points to 20.9% of net sales.

Alcon net sales were USD 1.6 billion (+8%, +6% cc) in the fourth quarter. Surgical growth of +9% (cc) was driven by cataract consumables and IOLs. Vision Care grew +2% (cc) including continued double-digit growth of Dailies Total1, partly offset by declines in the weekly/monthly portfolio. Stock in trade movements accounted for approximately 1% (cc) of Alcon growth in the quarter. Alcon's results reflect the fourth consecutive quarter of net sales growth as a result of improved operations, innovation, and customer relationships.

Operating loss was USD 78 million, compared to a loss of USD 120 million in the prior year, the improvement driven mainly by higher sales. Core operating income was USD 221 million (+36%, +36% cc), primarily driven by the higher sales. Core operating income margin in constant currencies increased by 3.0 percentage points mainly driven by higher sales; currency had a negative impact of 0.2 percentage points, resulting in a net increase of 2.8 percentage points to 14.1% of net sales.

Full year financials

Net sales were USD 49.1 billion (+1%, +2% cc) in the full year, as volume growth of 7 percentage points (cc), including growth from Cosentyx and Entresto, was partly offset by the negative impacts of generic competition (-3 percentage points) and pricing (-2 percentage points).

Net income was USD 7.7 billion (+15%, +12% cc) driven by higher operating income and income from associated companies. The prior year included exceptional charges related to a revaluation loss in Venezuela of USD 0.3 billion.

EPS was USD 3.28 (+16%, +14% cc) driven by net income growth and the benefit from the share buyback program.

Core operating income was USD 12.9 billion (-1%, 0% cc) broadly in line with prior year as sales growth and productivity fully offset generic erosion and growth investments. Core operating income margin in constant currencies decreased 0.3 percentage points, mainly due to generic erosion of Gleevec/Glivec, partly offset by growth drivers and productivity; currency had a negative impact of 0.3 percentage points, resulting in a net decrease of 0.6 percentage points to 26.2% of net sales.

Core net income was USD 11.4 billion (+1%, +2% cc), growing above core operating income due to higher core income from associated companies.

Core EPS was USD 4.86 (+2%, +3% cc) driven by growth in core net income and the benefit from the share buyback program.

Operating loss was USD 190 million for the full year, compared to a loss of USD 132 million in the prior year, mainly due to growth plan investments and higher impairment charges related to business development activities, partly offset by higher sales. Core operating income was USD 857 million (+1%, +5% cc), as higher sales were partly offset by growth plan investments. Core operating income margin in constant currencies increased by 0.2 percentage points; currency had a negative impact of 0.6 percentage points, resulting in a net decrease of 0.4 percentage points to 14.2% of net sales.

Key growth drivers

Underpinning our financial results in the fourth quarter is a continued focus on key growth drivers, including Cosentyx, Entresto, Promacta/Revolade, Tafinlar + Mekinist, Jakavi, Kisqali, Tasigna,Kymriah and Gilenya as well as Biopharmaceuticals and Emerging Growth Markets.

Growth Drivers (Q4 performance)

Cosentyx (USD 615 million, +53% cc) showed strong growth across all indications, with more than 125,000 patients treated since launch.

Entresto (USD 185 million, +164% cc) performance driven by growing adoption by physicians in US and Europe, and continued market access improvements.

Biopharmaceuticals (USD 309 million, +6% cc) grew mainly driven by Zarxio in the US and launches of Rixathon (rituximab) and Erelzi (etanercept) in the EU, partly offset by competition for Glatopa 20 mg.

Benefitting from our continued focus on innovation, Novartis has one of the industry's most competitive pipelines with more than 200 projects in clinical development.

Key developments from the fourth quarter of 2017 include:

New approvals and regulatory opinions (in Q4)

Tasigna (nilotinib) was approved by the EC for the treatment of pediatric patients with newly diagnosed Philadelphia chromosome-positive chronic myeloid leukemia in the chronic phase (Ph+ CML-CP) and pediatric patients with Ph+ CML-CP with resistance or intolerance to prior therapy including imatinib.

Tasigna US product label was updated with the inclusion of Treatment-Free Remission data, following FDA approval.

Gilenya (fingolimod) received FDA Breakthrough Therapy designation for relapsing forms of multiple sclerosis in the pediatric patient population, following the submission of Gilenya for a pediatric MS indication to both FDA and EMA. This was based on the phase III PARADIGMS study in children and adolescents, which showed an 82% reduction in the rate of relapses.

Sandoz biosimilar rituximab (Roche's Rituxan®) was granted manufacturing and marketing approval in Japan by the Japanese regulator, the PDMA.

Advanced Accelerator Applications acquisition completed in January.

Regulatory submissions and filings (in Q4)

Kymriah (tisagenlecleucel, formerly CTL019) filed with FDA for the treatment of adult patients with relapsed or refractory diffuse large B-cell lymphoma (r/r DLBCL) who are ineligible for or relapse after autologous stem cell transplant (ASCT), and with EMA for adult patients with r/r DLBCL who are ineligible for autologous stem cell transplant and children and young adult patients aged 3 to 25 years with relapsed or refractory B cell acute lymphoblastic leukemia. FDA granted Priority Review and EMA granted accelerated assessment of the submission.

RTH258 (brolucizumab) met its primary endpoint of non-inferiority vs. aflibercept in mean change in best-corrected visual acuity. Additionally, superiority was shown in three secondary endpoints that are considered key markers of nAMD disease, central subfield retinal thickness, retinal fluid and disease activity. Additionally, a majority of patients were on a 12-week treatment schedule immediately following the loading phase in two Phase III trials, also assessed by secondary endpoints in the HAWK and HARRIER trials.

Kymriah results from the primary analysis of the pivotal Phase II JULIET trial in adults with r/r DLBCL showed sustained complete responses at six months. The data showed an overall response rate (ORR) of 53.1%, with 39.5% of patients achieving a complete response (CR) and 13.6% of patient achieving a partial response (PR) among 81 infused patients with three or more months of follow-up or earlier discontinuation. At six months from infusion the ORR was 37% with a CR rate of 30%. The median duration of response was not reached.

Cosentyx (secukinumab) continues to build on its best-in-class profile:

MEASURE 1 data showed that almost 80 percent of ankylosing spondylitis patients on Cosentyx have no radiographic progression of the spine at 4 years (modified stoke ankylosing spondylitis spinal score <2).

ACZ885 pre-planned secondary analysis of an exploratory endpoint in the Phase III CANTOS study showed that people with a prior heart attack who achieved hsCRP levels below 2mg/L at three months after the first dose had a 25% reduction in major adverse cardiovascular events versus placebo. These patients also had a significant reduction of 31% in the rate of cardiovascular death and all-cause death.

SEG101 (crizanlizumab) post hoc subgroup analysis from the Phase II SUSTAIN study showed that SEG101 approximately doubled the time to first on-treatment sickle cell pain crisis (also referred to as vaso-occlusive crises) at a monthly dose of 5.0 mg/kg. Results were consistent across patient subgroups despite differences in disease severity, genotype or background therapy.

AMG 334 (erenumab) full data from the Phase III STRIVE study in episodic migraine was published in the New England Journal of Medicine.

AMG 334 LIBERTY trial, the first migraine prevention trial of its kind conducted specifically in patients who have tried multiple therapies without success, met its primary endpoint of percentage of patients on AMG 334 achieving at least a 50% reduction of migraine days versus placebo. Additionally, all secondary endpoints were met.

CNP520 BACE1 inhibitor collaboration with Amgen and the Banner Alzheimer's Institute was expanded to initiate a new trial, the Alzheimer's Prevention Initiative Generation Study 2.

Alcon Strategic Review

In early 2017, we announced a strategic review of the Alcon Division in order to explore all options to maximize value for our shareholders.

We have made significant progress in our ongoing strategic review. Alcon returned to growth in 2017, with full year sales growing 4% (cc) and core operating income growing 5% (cc) as a result of improved operations, innovation, and customer relationships. Alcon grew sales (cc) in every quarter of 2017 and accelerated core operating income margin in the second half. As communicated in October, key criteria for a final decision and timing remain continued Alcon sales growth and margin improvement which need to be demonstrated for multiple quarters leading to potential action not likely before first half of 2019.

Additionally, we have transferred the ophthalmic OTC products, together with a small portfolio of surgical diagnostic products, to the Alcon Division effective January 1, 2018. Total 2017 sales for these businesses amounted to approximately USD 0.8 billion. Updated segment financials will be released during Q1.

Product quality strategy

Novartis continues to drive compliance, reliable product quality and sustainable efficiency as part of the quality strategy. A total of 217 Health authority inspections were completed in 2017 (84 in Q4 2017), 30 of which were conducted by the FDA (9 in Q4 2017). Of the 217 inspections, 99% were deemed acceptable. Of the two that were not; one manufacturing site inspection by the Russian Ministry of Industry and Trade resulted in an unsatisfactory outcome (Puurs, Belgium) with corrective and preventative actions on track; the other outcome of an inspection by the Gulf Cooperation Council of the Unterach, Austria site performed in November is pending. Capital structure and net debt

Retaining a good balance between investment in the business, a strong capital structure and attractive shareholder returns remains a priority.

In January 2017, Novartis announced an up to USD 5.0 billion share buyback to be executed on the second trading line. In 2017, Novartis repurchased 56.4 million shares (USD 4.5 billion) under this buyback and 9.8 million shares (USD 0.8 billion) to mitigate dilution related to equity-based participation plans of associates. In addition, 3.8 million shares (USD 0.3 billion) were repurchased from associates and 13.4 million treasury shares (USD 0.9 billion) were delivered as a result of options exercised and share deliveries related to participation plans of associates. Consequently, the total number of shares outstanding decreased by 56.6 million versus December 31, 2016. Novartis aims to offset the dilutive impact from equity based participation plans of associates. These treasury share transactions resulted in a net cash outflow of USD 5.2 billion.

Group net sales in 2018 are expected to grow low to mid single digit (cc).

From a divisional perspective, we expect net sales performance (cc) in 2018 to be as follows:

Innovative Medicines: grow mid single digit

Sandoz: broadly in line to a slight decline

Alcon: grow low to mid single digit

Group core operating income in 2018 is expected to grow mid to high single digit (cc).

If mid-January exchange rates prevail for the remainder of 2018, the currency impact for the year would be positive 3 percentage point on net sales and positive 4 percentage point on core operating income. The estimated impact of exchange rates on our results is provided monthly on our website.

DisclaimerThis press release contains forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, that can generally be identified by words such as "innovation," "poised," "sustainable growth," "growth drivers," "growing," "Breakthrough Therapy," "Priority Review," "submitted," "accelerated assessment," "proposed," "outlook," "expected," "to grow," "pipeline," "launches," "priorities," "will," "driving," "growth phase," "strengthening," "enabled," "driven," "ongoing," "continued," "growth plan," "focused on," "expect," "momentum," "pipelines," "continues," "initiate," "strategic review," "options," "progress," "potential," "strategy," "on track," "remains a priority," "would," "estimated," "to be executed," "aims," "launched," "guidance," "launch," "to be discussed," "under review," "recommended," "next 12 months," "planned," "Fast Track designation," "underway," or similar expressions, or by express or implied discussions regarding potential new products, potential new indications for existing products, or regarding potential future revenues from any such products; or regarding the potential outcome of the strategic review being undertaken to maximize shareholder value of the Alcon Division; or regarding the potential financial or other impact of the significant acquisitions and reorganizations of recent years; or regarding the potential impact of the share buyback plan; or regarding potential future sales or earnings of the Novartis Group or any of its divisions or potential shareholder returns; or by discussions of strategy, plans, expectations or intentions. You should not place undue reliance on these statements. Such forward looking statements are based on our current beliefs and expectations regarding future events, and are subject to significant known and unknown risks and uncertainties. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those set forth in the forward looking statements. There can be no guarantee that any new products will be approved for sale in any market, or that any new indications will be approved for any existing products in any market, or that any approvals which are obtained will be obtained at any particular time, or that any such products will achieve any particular revenue levels. Nor can there be any guarantee that the strategic review being undertaken to maximize shareholder value of the Alcon Division will reach any particular results, or at any particular time, or that the result of the strategic review will in fact maximize shareholder value. Neither can there be any guarantee that Novartis will be able to realize any of the potential strategic benefits, synergies or opportunities as a result of the significant acquisitions and reorganizations of recent years. Neither can there be any guarantee that shareholders will achieve any particular level of shareholder returns. Nor can there be any guarantee that the Group, or any of its divisions, will be commercially successful in the future, or achieve any particular credit rating or financial results. In particular, our expectations could be affected by, among other things: global trends toward health care cost containment, including government, payor and general public pricing and reimbursement pressures and requirements for increased pricing transparency; regulatory actions or delays or government regulation generally; the potential that the strategic benefits, synergies or opportunities expected from the significant acquisitions and reorganizations of recent years may not be realized or may take longer to realize than expected; the inherent uncertainties involved in predicting shareholder returns; the uncertainties inherent in the research and development of new healthcare products, including clinical trial results and additional analysis of existing clinical data; our ability to obtain or maintain proprietary intellectual property protection, including the ultimate extent of the impact on Novartis of the loss of patent protection and exclusivity on key products which commenced in prior years and will continue this year; safety, quality or manufacturing issues; uncertainties regarding actual or potential legal proceedings, including, among others, actual or potential product liability litigation, litigation and investigations regarding sales and marketing practices, intellectual property disputes and government investigations generally; uncertainties involved in the development or adoption of potentially transformational technologies and business models; general political and economic conditions, including uncertainties regarding the effects of ongoing instability in various parts of the world; uncertainties regarding future global exchange rates; uncertainties regarding future demand for our products; and uncertainties regarding potential significant breaches of data security or data privacy, or disruptions of our information technology systems; and other risks and factors referred to in Novartis AG's current Form 20-F on file with the US Securities and Exchange Commission. Novartis is providing the information in this press release as of this date and does not undertake any obligation to update any forward-looking statements as a result of new information, future events or otherwise.

All product names appearing in italics are trademarks owned by or licensed to Novartis Group companies. Rituxan® is a registered trademark of Biogen. Neulasta® is a registered trademark of Amgen Inc. Humira® is a registered trademark of AbbVie Inc. Stelara® is a registered trademark of Janssen Biotech, Inc. Seretide® is a registered trademark of GlaxoSmithKline. Jakafi® is a registered trademark of Incyte Corporation. Enbrel® is a registered trademark of Amgen Inc.

About NovartisNovartis provides innovative healthcare solutions that address the evolving needs of patients and societies. Headquartered in Basel, Switzerland, Novartis offers a diversified portfolio to best meet these needs: innovative medicines, cost-saving generic and biosimilar pharmaceuticals and eye care. Novartis has leading positions globally in each of these areas. In 2017, the Group achieved net sales of USD 49.1 billion, while R&D throughout the Group amounted to approximately USD 9.0 billion. Novartis Group companies employ approximately 122,000 full-time-equivalent associates. Novartis products are sold in approximately 155 countries around the world. For more information, please visit http://www.novartis.com.

Novartis issued its 2017 Annual Report today, and it is available at www.novartis.com. Novartis will also file its 2017 Annual Report on Form 20-F with the US Securities and Exchange Commission today, and will post this document on www.novartis.com. Novartis shareholders may receive a hard copy of either of these documents, each of which contains our complete audited financial statements, free of charge, upon request. Novartis also issued its 2017 Corporate Responsibility Performance Report today, and it is available at www.novartis.com.